Do you have to pay a debt if it's been sold?

Right now, Americans are in big trouble when it comes to their debt, and credit card debt is a major issue, in particular. Not only are total debt levels higher than ever, but borrowers nationwide are carrying a collective $1.21 trillion in credit card debt alone, and as card interest rates hover close to an average of 23%, millions of people are falling behind on their payments. If your accounts become seriously delinquent, though, your creditors may decide to cut their losses by selling those debts to collection agencies for pennies on the dollar. 

The debt collection industry processes billions of dollars in purchased debt annually, with third-party debt collectors acquiring massive portfolios of unpaid accounts from original creditors. This practice has become increasingly common over the years, and as the economic challenges continue, even more accounts could switch hands from the original creditors to third-party debt collectors. While the change in ownership might feel like a reset button, though, the legal reality is more complicated than many borrowers assume.

Understanding what happens when your debt gets sold can help you make informed decisions about how to handle these situations. So, are you legally obligated to pay a debt if it's been sold to another company?

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Do you have to pay a debt if it's been sold?

The short answer is yes, you generally still have a legal obligation to pay a debt after it's been sold to a debt collection agency or a debt buyer. The sale of your debt doesn't erase what you owe or reset the clock on your repayment responsibilities. When a creditor sells your account, they're essentially just transferring the right to collect that debt to another entity, but the underlying obligation remains intact.

However, the debt buyer must still prove they own the debt and have the legal right to collect it if you request that they do so. Under the Fair Debt Collection Practices Act, you have the right to request validation of the debt within 30 days of the first contact. This means the debt collector must provide documentation showing the debt is yours, the amount is accurate and they have the authority to collect it. If they can't provide adequate proof, they cannot legally pursue collection on the account.

The amount you owe may also be subject to your state's statute of limitations, which typically ranges from three to 10 years, depending on the state you live in. Once this period expires, the debt becomes "time-barred," meaning debt collectors cannot sue you to recover the money, though they may still attempt to collect through other means. 

It's important to note that making a payment or even acknowledging the debt in writing can restart this clock. So, if you think the debt may be close to the end of the statute of limitations, proceed carefully.

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What options do you have for resolving sold debts?

When debt gets sold to collection agencies, an unexpected opportunity often emerges because these buyers typically purchase debts for a fraction of their face value, sometimes paying as little as a few cents per dollar owed. This creates significant negotiating leverage for borrowers who are ready to address their debts.

Debt settlement, for example, can be particularly effective when dealing with purchased debts. The goal with this approach is to negotiate with creditors and debt collectors to settle accounts for less than the full balance, and when successful, it could reduce what you owe by 30% to 50% (or more in certain cases). Debt buyers have already acquired your account at a steep discount, after all, so they're frequently willing to accept reduced settlements rather than holding out for the full balance.

Or, if you can't make a lump-sum settlement payment out of pocket and you don't have time to save up for one, you may find that debt collectors are more flexible in terms of offering long-term payment arrangements than original creditors. Debt collection agencies are motivated to recover something during the process, which can translate into more repayment flexibility or extended payment plans that fit your budget. 

You can approach either strategy on your own, but working with a debt relief company or another type of debt expert could result in a better outcome. Both professional debt relief services and credit counselors can evaluate your specific situation and determine whether debt settlement, debt management or another strategy would make the most sense for your circumstances.

The bottom line

Your obligation to repay a debt continues even after it's sold to a debt collection agency, but this transfer of ownership doesn't strip away your legal rights or eliminate your options for resolution. In fact, dealing with debt buyers often provides more negotiating flexibility than working with original creditors, particularly if you're ready to address the debt through lump-sum settlements or structured payment arrangements. If you're struggling with purchased debts, consulting with a reputable debt relief service or another type of expert can help you understand your options and potentially resolve these accounts for significantly less than you currently owe.